Sneetch Inc. purchased a star-making machine on January 1, 2014. The cost of the

Question

Sneetch Inc. purchased a star-making machine on January 1, 2014. The cost of the machine was $30,500. Its estimated residual value was $6,500 at the end of an estimated 10-year life. The company expects to produce a total of 10,000 units. a. Calculate depreciation expense for 2014 and 2015 using the straight-line method. b. Calculate depreciation expense for 2014 and 2015 using the double-declining balance method. c. Calculate the depreciation expense for 2014 and 2015 using the units-of-production method. The company produced 1,150 units in 2014 and 1,600 units in 2015. (Round your final answer to nearest dollar value.)

Explanation / Answer

Ans a - Total depreciation in 10 years = 30500 - 6500 = 24000. Depreciation per year = 2400. Depreciation expense for 2014 and 2015 through straight line depreciation is $2400.

Ans b - Depreciation percentage through straight line method = 2400 / 30500 = 0.0787 or 7.87%. Depreciation rate for double declining method = 15.74%. Depreciation for 2014 = $4800. Depreciation for 2015 = (30500 - 4800) x 0.1574 = $4045.18.

Ans c - Depreciation per unit = 30500 / 10000 = $3.05. Depreciation in 2014 = 1150 x 3.05 = $3507.5. Depreciation for 2015 = 3.05 x 1600 = $4880

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